Doomed Planet

Whither CSIRO?

Tom Quirk

There is much complexity in innovation and there could be few better illustrations of this than the invention of Wifi by radio astronomers from the CSIRO.

Whether politicians and policymakers will take notice is a quite different matter.

On April 14, The Australian ran an article, "CSIRO’s $220m WiFi deal trumped by an app", by Rebecca Urban in which the she discusses the CSIRO success in extracting royalties for the development of WiFi through the Wireless Local Area Network (WLAN) patents of the CSIRO that will expire in 2013. She contrasts this with an acquisition by Facebook of a phone app, Instagram, for $US1 billion from a start-up business.

The article also lists the top five royalty earners for the CSIRO of which the WLAN technology is top and the influenza drug Relenza is third.

Wifi, or WLAN, was created by radio astronomers who had a problem to solve for the radio telescopes they were building. Although the CSIRO patented the invention it was a non-exclusive licence to two Macquarie University professors and their company Radiata that gave rise to the first WiFi chips and the year 2000 sale of Radiata for around $600 million to Cisco Systems. This sale brought in more revenue than the CSIRO revenue from all their subsequent licensing and legal successes in enforcing their patents.

Relenza was not developed by the CSIRO but rather by a small Australian biotechnology company Biota. The CSIRO Division of Protein Chemistry through an X-ray crystallographer, Peter Colman, provided the essential data for the creation of the drug. This occurred at the Victorian College of Pharmacy and the final Relenza molecule was created by a Biota scientist with the patents the property of Biota and some 10 percent of the Biota royalties and payments from GlaxoSmithKline going to the CSIRO until this was ended with a buyout of the future CSIRO royalty stream in 2007. Biota royalties from Relenza were over $180 million by the end of 2011. Biota has gone on to create independently from the CSIRO new influenza drugs that are in various stages of development.

These two examples show the complex path that gives rise to innovation. It is arguably a random walk. The original developers of the technology may have had little idea or interest in the potential uses of their work. Further the path to a marketable product shows how the rewards go to those taking commercial risks.

In fact the CSIRO does not make a living from royalties any more than the universities. Indeed surveys by the Australian Bureau of Statistics show in 2006-07 that only 2.6% of ideas for innovation were sourced from universities and 4.1% from government agencies. This result is not unique to Australia.

In 2008-09 the total spending from all sources on R and D was $28 billion with $17 billion from business and the balance for universities and government institutions. But look at the evidence. Government institutions and universities don’t give much bang for the buck where 38% of Australia’s R and D expenditure generates only 6.7% of the ideas. Universities of course play a key role in educating accountants, engineers, scientists and many others who do make the innovations in the companies where they work and may have even founded. The universities also publish results and hold conferences so research information enters the public domain.

So what does the CSIRO do that is not equally well done in universities? If its broader mission is to foster technological developments that are in the national interest how do we define the national interest for a research organization? The answer is that we appear to have a set of national needs defined by the government of the day. The needs de jour are combating climate change and making computer model forecasts of the disasters facing us if we don’t, a brilliant strategy that reinforces the funding needs of the organization. But university vice-chancellors are alert to this approach and there are now institutes for climate change, energy (renewable not nuclear) and others that can be funded directly by governments in competition with the CSIRO.

But if all this is to develop technology then the track record is pretty dismal although not unexpected. The best lesson from the examples above is the old California venture capital lament: the pioneers are the ones with arrows in their backs!